Saturday, 30 June 2018

China calls itself a
democratic dictatorship, so it looks like the title’s question is a
very odd one to ask. You can find various indices that measure
countries on a line with dictatorship at one end and democracy at the
other. So how can a country actually be (rather than call itself) a
democratic dictatorship?

Consider Hungary.
Its Prime Minister Viktor Orbán has pledged
to create an illiberal state like Russia or China. Perhaps as a
result, European Commission President Jean-Claude Juncker at a 2015
EU summit dispensed with diplomatic protocol to greet
Orbán with a "Hello, dictator." To further this aim he has
gone about controlling the media and courts either directly or
through placement of allies, with complete
success. Yet he and his party remain popular in part because of the
lethal combination of extreme nationalism, scaremongering about
migrants and antagonism against Muslims and Jews. In addition NGOs
have been attacked, which has led to legal proceedings by the
European Commission. A host of public bodies like its fiscal
council, the central
bank, and the national elections commission, have been
abolished or their independence limited.

Yet Hungary is still
a democracy in the sense of having reasonably genuine elections. As
the opposition is fragmented there is little need to resort to the
kind of tactics used in other democracies, such
as Turkey. When occasionally the opposition does win a local
election, Orbán unleashes
the full might of his nationalist, enemies at the door, enemies
within narrative at them. With almost total control of the media and
civil institutions, he can make life very difficult for the
opposition. He won
his last election with ease. It is an effective model that could
survive for many years.

So would it be
reasonable to call Hungary a democratic dictatorship [1], or is that
just a contradiction in terms? Hungary is no longer a pluralist
democracy, by which I mean there are no independent centres of power.
But there are still elections, which are not a complete fiction. But
you cannot call elections where one side completely controls the
media fair. The acid test would be if a unified opposition under a
credible leader ever did appear whether he would ever be allowed to
win.

---------------

“American media should study Hungary’s record,” Newt Gingrich
declared
after a visit to Hungary. He was talking about the 13ft-high
razor-wire border fence that Orban erected against the influx of
“foreigners”, but few can doubt that Trump would like to emulate
Orbán in other ways. He already has what is effectively a state TV
station, the widely watched Fox News. His attacks on the independent
press are relentless. He does not yet control the media in the same
way as Orbán does, but he gets his apologists on CNN and other
stations as these stations try and keep ‘balanced’.

Having Fox on his side is crucial in his ability to control the
Republicans in Congress. Speak out and you risk losing your seat in a
primary election against a Trump loyalist. The few who do speak out
tend to be retiring from politics. The democratic norms of politics
that have stood for decades in the US have gone out of the window. He
breaks the norms because he knows
no one will stop him. Other countries that are able to have long
recognised that the way to get foreign policy favours is to grant
some business perk to him or his family. (We see similar corruption
in Hungary.)

He may not control the courts to the extent that Orban does, but he
is not miles away. Soon he, or at least his party, will get a
majority on the supreme court. He has pardoned whoever he likes at
his whim. The Republican party have retained a majority in the House
in part because of gerrymandering, and the supreme court allows
this to continue. Orbán fights a long but successful battle to close
down a university in Budapest, while Trump’s climate change denying
appointees try to close down scientific research in the US. (On the
latter, see this excellent essay
from Carl Zimmer HT Tim Harford.)

Trump makes no
secret of his admiration for dictators. In a way it does not really
matter if Putin has ‘something on him’ in the form of a tape of
whatever, as Trump admires Putin anyway as a strong man leading his
nation. His natural enemy is Europe: hence his attack on Merkel and
his constant and incorrect references to rising crime as a cost of
immigration in Europe.

---------------

Another way of
looking at this is to consider human rights and their suppression.
Hungary has just passed
a law making it illegal to provide legal help to undocumented
immigrants seeking asylum, as part of a set of bills incredibly
called ‘Stop Soros’. George Soros has become Orbán’s bogeyman.
Trump separates the children of illegal immigrants from their
families. As Fintan O’Toole says,
this has not been a ‘mistake’ by Trump, but a trial run

“to undermine moral boundaries, inure people to the acceptance of
acts of extreme cruelty. Like hounds, people have to be blooded. They
have to be given the taste for savagery. Fascism does this by
building up the sense of threat from a despised out-group”

Or to deal with an infestation of immigrants, as Trump said recently.
And O’Toole thinks the experiment was a success: the base were
happy, and Fox news talked about child actors pretending to cry.
Italy’s new interior minister calls for a “mass cleansing” of
migrants from “entire parts” of the country,
street by street.

---------------

Arguments that
democracy is still safe in the US seem rather naive. A Washington
Post piece
from just a year ago says there are four barriers to the US becoming
a ‘populist’ state. The four are the independence of congress and
the judiciary, being restrained by the Republican party, limited
patronage powers, and the absence of any crisis. The first two have
not done too well and the last two do not seem to matter. Tyler Cowan
thinks
the US government is just too large and complex for one man or group
to take control. He is correct insofar as Mueller has been allowed to
continue. But there is little chance
of Trump being impeached by this Republican party. Whether Mueller is
allowed to continue depends a lot on whether he goes after Trump
family members, and Mueller probably understands that. The important
point is that Trump does not need to control every part of government
to control what happens.

Trump certainly acts
like a dictator would act. The barriers to Trump becoming an Orbán
type figure are that his supporters do not control most of the media,
and he faces a single and organised opposition party. These are the
two threads by which this pluralist democracy hangs. You might think
it an exaggeration to call these two only threads, and I hope we will
see that it is in the midterms, but there are worrying signs in the
US and elsewhere that popular support for democracy is falling, as
documented by Yascha Mounk in a book reviewed here.
The fact that Trump could be elected and then supported in the first
place by one of the two main political parties in the US is a clear
sign that all is not well with US democracy. Those, like Paul
Krugman, who have for a long time appeared ‘shrill’ about what
was happening to the Republican party have been fully justified in
their fears.

The rise of the far
right and democratic dictatorships in the West have happen before, of
course. It is no coincidence that in the 1930s and now economies were
scarred by deep recessions followed by bad policy. That may be
important in part because it fosters intolerance of ‘outsiders’,
particularly immigrants, which parties of both the far right and
unfortunately the centre right have exploited. (In the UK, and also
in Hungary and Poland, the EU has also become an outsider.) Since
perhaps Nixon, the Republicans have exploited race: more explicitly
and vigorously as time has gone on. Parties of the right do this in
part because their backers want to avoid redistribution being used as
a way of mitigating the impact of bad economic times, and focusing on
social conservatism can capture
voters who would otherwise vote left on economic issues. I have
described both the bad policies (austerity and fears about
immigration) as forms of deceit (using debt as a cover for reducing
the state and setting targets for immigration without intending to
meet them), and collectively as neoliberal overreach.

---------------

If the demonisation
of immigrants is the common thread in these moves towards democratic
dictatorships, then it becomes important to resist the early stages
of this process. One lesson of the experience across countries is
that popular concern is not primarily about numbers. It is not the
reaction of citizens worried about being overwhelmed by immigrants.
Less than 5% of the population in Hungary are immigrants: 3% if you
count only immigrants from outside the EU. Nor is it true that
attitudes to immigration are always going to be hostile. This year
for the first time in a decade more people in the US think
legal immigration should be increased rather than decreased.

But this idea is
difficult to get across. In the UK for example it is true that rising
concern about immigration follows rising numbers, but it follows
increased newspaper coverage even more closely, and which newspapers
people read is the best explainer of immigration concern. [2] With a
few important exceptions the concern is generally about immigration
‘in the country’ rather than locally. In the UK stoking fear
about immigration may not as yet have created the conditions for a
democratic dictatorship, but it has spawned a ‘hostile environment’
policy that led people to be locked
up and deported illegally, and of course it was
critical in forcing the country make one of its biggest policy errors
for a generation.

I have heard people
say that we have to have Brexit because otherwise half the country
will feel betrayed (as opposed to the other half already feeling
that). But in reality the opposite is true. Xenophobia becomes strong
when economic conditions are bad, and Brexit will make them worse.
Brexiters are going to feel betrayed anyway when they realised they
have been sold snake oil. If we are to avoid a self reinforcing cycle
of economic and political decline, we must give priority to the
economy and stop scapegoating immigrants for each policy failure.

[1] Whether the term
dictatorship is more accurate than one party state or the term
plutocracy that I have used before
is interesting, but not I think critical for the discussion here.

[2] Let me try and
be clear what I mean by immigration concern not being about numbers.
Of course large numbers of immigrants make it easier for newspapers
to talk about ‘floods’ and ‘being overwhelmed’. The mistake
is to think that if only the numbers could be reduced somewhat, the
concern would disappear. It will not because it is not in the
interests of those whipping up concern for that to happen. Any
attempt to appease the concern by, for example, vetting patients in
A&E only gives credibility to the idea that immigrants are
responsible for reduced access to the NHS: in reality the opposite is
true.

Wednesday, 27 June 2018

Project Fear was the
device that allowed those arguing for independence for Scotland to
ignore the short term fiscal realities [1], and it was the device
used by Leave to discount the countless warnings that Brexit could
make the UK significantly poorer. The device was indulged by the
broadcast media, who now duly quote it back at businesses who warn
that jobs are at stake with any kind of hard Brexit.

There are good
reasons why so many businesses have finally decided to make their
concerns public. They have lost all faith that the government knows
what it is doing, and they have recently lost faith in parliament
restoring any kind of sanity. Hence the warnings from Airbus,
BMW,
and the society of Motor
Manufacturers. This is no posturing, as figures
for car industry investment show. These numbers will only jump back
up once Brexit uncertainty ends if the final deal is a positive one
as far as car makers are concerned. A UBS survey
suggests that car makers are not unusual in this respect.

So why are firms not
excited by the opportunities a Tory Brexit will bring in terms of
less regulation and ‘global Britain’? They know global Britain is
a myth: they can export perfectly well outside the EU as it is, and
they are more likely to get a good trade deal with third countries by
being in the EU than outside it. Those who say that a post-Brexit UK
could do trade deals tailor made to UK business misunderstand what
trade deals are mainly about nowadays. They are about harmonisation
of regulations. And if a country is going to harmonise its
regulations, it will do this with the EU rather than the UK because
the EU is a much larger market.

Which is why the
prospect of a regulation free post-Brexit UK has little appeal to
businesses that trade. What business wants is harmonised regulations,
giving them less costs and a large market. The EU is really all about
harmonisation of regulations. These include regulation on working
hours or the environment because all these things are required to get
a level playing field for business and therefore a true single and
very large market.

As Anthony Barnett
in a very interesting essay argues,
the sovereignty argument for Brexit involves a huge misconception.
What the EU does (human rights aside) is harmonise regulations. Most
people, including Leavers, have little problem with that. What
Brexiters did was relabel this as giving away sovereignty, which
sounds bad. I often ask Leavers if they can name any EU law ‘imposed’
on the UK that they do not like, and I have yet to get anyone to
respond with one. It is the principle, one said. But their inability
to quote an example of loss of sovereignty reveals an underlying
truth. The EU is about harmonisation of regulations, regulations that
most people have no problem with.

I do not think this was just a deliberate bit of Leave deceit,
although there was plenty of that. I suspect this was also a genuine
lack of understanding among our out of touch, privileged elite.
Partly as a result, when businesses ask for harmonised regulations in
the form of the single market they are nonplused. Hence the response
of the government to these warnings. They include the “fuck business”
of Boris Johnson and Jeremy Hunt saying the warnings were
“completely inappropriate” because it could undermine the
prospects for a good deal! These replies reflect the bewildered
fumbling of an elite that thought they were pro-business and suddenly
finding that they are doing it considerable harm.The irony is that any deal that is done will involve the UK still being subject to EU regulations, only without the UK having any effective say in how those regulations evolve. For the leavers who equated regulations with sovereignty, we will be less sovereign as a result of Brexit than we were before. Brexit as a project has failed. We continue with it simply because of a flawed referendum and because politicians cannot admit the truth to save their own reputations and for fear of the reaction of the Brexiter press..

It should also be the end of Project Fear, for those at least who
still have an open mind and who do not believe everything they read
in the Brexit press (which I admit may rule out around a third of the
UK population). Project Fear, in the two main contexts that it has
been used, is equivalent to the claim that we don’t need experts.
Just as Faisal Islam reacted to Gove when he first talked
about having enough of experts, so other journalists should react
when Project Fear is used to bat away major expected costs based on
expert analysis. Otherwise we just normalise a kind of Republican
anti-science attitude that is now official US policy.

[1] although, to
save a lot of comments, the term itself was invented by those arguing
against independence.

Sunday, 24 June 2018

Last week saw
leading lights in one mass movement, the Labour party, attack
elements of another mass movement, those who want to remain in the
EU. What led to this attack seemed to be posters
issued by an organisation called OFOC
depicting John McDonnell in the pocket of arch Brexiter Jacob
Rees-Mogg. My own view is that these poster were a waste of money and
hardly worth bothering with. But leading lights in the Labour
movement tried to suggest to grass roots Remain supporters that
they are being used as a way to attack Corbyn, as here
for example.

As it happens I have
quite recently suggested that some Remain campaigners risk the danger
that their message is sounding very similar to the numerous
anti-Corbyn attacks you can find throughout the media. For example suggesting
that the only thing in the way of stopping Brexit is Corbyn (ludicrous) and that
therefore he has to go (won't happen). As the only chance of a vote on
the final deal is if Labour supports it such a message is positively counterproductive.

However the attacks
from Bastini, Mason and others took a different tack, listing in
great detail how OFOC was connected to, and possibly funded by,
certain Tory and LibDem figures. This was the basis of the ‘being
used’ claim. There are two big problems here. First, Remain is a
cross party movement. So what exactly is the big deal with
establishing all these links? So what, you might say. Second,
Remainers have every reason to be critical of Labour policy, which is
now clearly not to stay in the EU.

The days of
triangulation are over. We now know that the Labour leadership wants
a negotiated deal with the EU that has some safeguards on
nationalisation etc, and for some MPs at least some limits to free
movement. As the great majority of Labour members and voters support
staying in the EU, this is a difficult position for the Labour
leadership to take. Labour are therefore acutely vulnerable. Indeed as there is a chance that Labour might back a people's vote but May never will, it is sensible that Remainers now concentrate any pressure on the Labour leadership.

Picking a fight with
some Remainers by suggesting they are, knowingly or not, just an
anti-Corbyn front because they attack Labour on Brexit seems to both miss the point and to be terrible
politics. I guess it can be what happens when two mass movements with considerable overlap in terms of membership clash. Of course any Brexit negotiated by Corbyn would be less
harmful than the Brexit May might be able to negotiate, and Labour
still might vote against the final deal and support a referendum on
it, but until Labour do start saying No Brexit is better than May’s
Brexit Labour are vulnerable and have to accept that Remainers will
try and put pressure on them.

All of which is of
course a minor sideshow to what will be the main story of the next
few months: will May be able to negotiate a deal with the EU? Labour
are completely irrelevant in answering this question. The answer will
depend on whether May will finally break with the Brexiters, and how
much these Brexiters react to this rejection. The deal that will be done, which involves at a minimum being in the
Customs Union and the Single Market for goods, is anathema to most of
the Brexiters based on their past behaviour. That deal, as I have argued before, represents the
almost complete failure of the Brexiter project.

The Brexiters have
two choices. They can try and make it as hard as possible for May
such that she fails to get a deal, and hope that the UK leaves with
No Deal as a result. Although there is much you can criticise in May
as a Prime Minister, her stubbornness probably means she will
not allow her deal to be sabotaged in this way, but that will
probably not stop the Brexiters trying. The second choice Brexiters
have is to park their displeasure at the deal until we leave in 2019,
and hope that they can achieve further breaks from Europe
subsequently, perhaps by getting a Brexiter as Conservative party
leader. The problem with this strategy is that time is not on their
side: demographics, losing the Mail, and people seeing how the UK
steadily falls behind the rest of the EU are just some of the reasons
why.

There is no doubt
that May will do what she can to get a deal, and I suspect the
Brexiters will not have the support or the will to stop her once she
stops appeasing them. Which leaves Labour in a dangerous position,
where they may alienate Leavers by voting against the deal, and
alienate Remainers for not supporting Remain. The days when they
could keep both groups happy by triangulating, and almost win a
general election, are over. They cannot be crazy enough to vote for or abstain on the final deal, because then they become complicit in all the
economic harm that Brexit will do, as well as alienating the majority
of its own members and voters. It would mean four years of Labour losing Leave voters to the Conservatives (as the Brexit press would spin anything other than a vote for the deal as Labour opposing Brexit), and Remain
voters to the LibDems or Greens.

One thing we have
learnt in the last week is that most of the handful of Tory rebels will not have the
courage to vote against any deal May makes. (No deal is another
matter.) So Labour will lose the parliamentary vote on the final
deal. Labour are not in government, and the deal is being done now, so what they would want to do in government is irrelevant. That means that they have little to lose by backing the popular people’s vote
against May’s deal as well as voting against that deal. No Brexit is better than May’s Brexit. That
way, they allow the two movements to march as one.Postscript 27/06/18Conversations with some Labour party activists both before and after this post suggest that Labour has to focus on winning over Leave voters in traditional Labour held constituencies, and so has to appear to back Brexit where it can. There is a danger that they are taking for granted many who voted for them in 2017 because they thought Labour would stop Brexit, and still do (See, for example, this poll in January 2018, where only 19% of Labour voters think Labour is pro-Brexit.) There is a danger that we are seeing a repeat of what happened over austerity in 2015: Labour taking for granted that anti-austerity voters would vote for them, and at the same time failing to win over pro-austerity voters with talk of being 'tough on the deficit'. Much the same happened with immigration.

Thursday, 21 June 2018

John McDonnell wants
to raise UK investment not by cutting corporation tax but by
diverting funds from parts of the financial sector away from property
to new investment by UK firms. That is a laudable aim. But giving the
Bank of England that task with a 3% productivity target is not the best
way to do that. However that is not because I think central banks cannot influence productivity.

The kind of toy
model many people work with is that monetary policy is all about
stabilising the business cycle, but that stabilisation has no impact
on the medium term level of output and productivity. That is because
productivity is determined by the ‘supply side’ of the UK
economy. And this toy model worked particularly well for the UK
economy, which from the early 1950s until before the GFC seemed to
always bounce back to an underlying trend rate of growth for GDP per
capita of around two and a quarter per cent.

However over none of
that period did we experience a recession where nominal interest
rates hit their lower bound and fiscal policy turned from stimulus to
austerity before the recovery had begun. In other words in none of these periods did we have a
persistent period of deficient demand with growth never exceeding its
long term average. I have argued
that it is wrong to see the UK productivity puzzle as a period of
uniform gloom since the recession, but rather there were periods of
growth which were set back by uncertainty following two additional
major policy shocks: austerity and the EU referendum.

Yet if you ask UK
monetary policymakers whether they think they have done a good job
over the last 10 years, they will say (in public at least) that they
think they have. They do not say they have failed because of shocks
they couldn’t control, which would be a reasonable position, but
rather they have done reasonably well at controlling the economy. In
the context of the slowest recovery for at least a century, with a
consequent permanent hit to output (output is over 15% below previous
trends), that degree of public self-satisfaction indicates a major
problem. And if you ask them how they can possibly be satisfied they
will talk to you about inflation.

This is a clear
reason to question the inflation target.
Although in toy models controlling inflation should also mean
controlling output, the real world is much more confusing. By making
the bottom line inflation, we are bound to make policymakers worry
too much about inflation relative to output. The clearest case for me
was 2011, when the ECB and almost the MPC raised rates when the
recovery from recession was only just beginning.

For that reason I
have long supported a more US style twin mandate. Yet although the US
had a better recovery than the UK or Eurozone, the Fed still seems to
be giving inflation much more weight than employment. But you cannot
ignore inflation completely. The mandate I propose for monetary
policy is this:

To maximise
output growth subject to maintaining inflation within 1% of its
target by the end of a (rolling) 5 year period.

Another thing we
have learnt from the Great Recession is that policy has to change
once nominal interest rates hit their lower bound. So I would,
following Ben Bernanke, add to this mandate a ‘lower bound
adaptation’ where the moment interest rates hit their lower bound the inflation target would be converted into an equivalent path for the
price level. That would mean that if inflation undershot its target
during the recession, it would have to overshoot it before rates
could be lifted above their lower bound. I would also require central
banks the moment they think rates will hit the lower bound to say
publicly that fiscal stimulus is now required to meet its target.

This is a dual
mandate, but one that puts the emphasis on output rather than
inflation. [1] Why the 1% tolerance? Because it echos current UK
arrangements (when the governor has to write letters) but in practice
will raise average inflation. This is a feature rather than a bug:
another lesson of the last recession is that there is a strong case
for a higher inflation target, but in a situation where the
Chancellor sets the target it is very difficult to formally raise the
target because many people think higher inflation means lower real wages.

Tasking central
banks to maximise output subject to an inflation constraint is
certainly better than setting a probably unattainable target for
productivity growth when we have no idea what the maximum
productivity growth rate is. My suggestion is a dual mandate that
puts the emphasis on output and makes clear inflation is a medium
term concern, making it easier for central banks to see through
temporary shocks to inflation like one-off depreciations. The nature
of the target recognises that policy has to adapt when nominal
interest rates hit their lower bound. Comments very welcome.[1] What is the logic of giving inflation zero weight in the short run and total importance in the long run? The answer lies in asking what the costs of inflation are. Modern analysis looks at how when prices are sticky but set at different times, inflation distorts relative prices. But inflation due to changes in flexible prices is costless. Now it is not easy to distinguish between the two types of prices in price indices, but inflationary shocks that impact on flexible prices are likely to be short lived, while those that impact on sticky prices will be more prolonged. It therefore makes sense to ignore temporary changes in inflation (those that die out within five years), but because of the vertical long run Phillips curve have a medium term inflation target.

Tuesday, 19 June 2018

This post is about the Brexit Dividend and how broadcasters should
treat it. However I want to start with an extreme case: Donald Trump.
He is the right place to start because he became POTUS in good part
because of how the media treated him and his opponent. He gained
publicity by saying outrageous things. That increased his poll
rating, so he started getting favourable coverage because his poll
ratings were going up. (I explain how this works in more detail
here.)
Once he was the republican candidate, the media’s obsession with
balance meant they spent
as much time talking about the trivial issue of Clinton’s emails as
Trump’s lies, whether he pays any taxes, bribes officials and
assaults women.

One of the most remarkable polls during that campaign was that more
people trusted Trump than Hillary Clinton. How can someone who lies
all the time, almost every time he says anything, be trusted more
than Hillary Clinton, who has had countless Republican inspired
investigations into her affairs and has never been convicted of anything.
For some time cognitive
linguist and philosopher George Lakoff has pioneered the idea that
(among many other things - see for example a Guardian article
with Gil Duran) lies that are repeated often enough become
associations in people’s minds that they find it hard to combat. So
the phrase ‘crooked Hillary’ that Trump repeats all the time has
a purpose beyond firing up the base. Equally when Republican’s
start investigations into her affairs that alone puts an association
of guilt in people’s minds. That is a key reason why before the
election they trusted Trump more than Clinton.

In the United
States Trump played the media big time, and continues to do so. If
the media is not careful the same thing could happen here. The phrase
‘Brexit dividend’ is the equivalent of ‘crooked Hillary’. If
it is repeated enough, a sufficient number of people will begin to
associate Brexit with a ‘dividend’, whether that dividend is real
or not. And in case someone reading this does not know by now, the
Brexit dividend is a complete fiction.

To see how
May’s claim that there is a Brexit dividend should be handled, read
this
in the FT and this
from Sky News. (HT Femi) The FT article does not have ‘Brexit
dividend’ in its title, and this is important. As Lakoff argues,
the more often people see those two words together the more likely
they are to associate them, so do not put it in a headline as many
people just read headlines. (Putting it in inverted commas does
nothing.) He suggests what he calls the ‘truth sandwich’
approach: begin with a truthful statement, then report the dishonest
spin, and then fact check the spin. Leaving out that first stage
plays into the hands of whoever promoted the spin.

Who are the
heroes and villains in this example of barefaced lying (see my definition of barefaced below). For villains
we have to start with Theresa May herself:
if this is a sop to the Brexiters in exchange for a soft Brexit that
is no mitigation. Boris Johnson of course for suggesting the idea:
the court might like to take a large number of previous offences into
account. The right wing Brexit press
for whom lying is just part of their game.

Heroes
include Paul Johnson, who toured the broadcasters on Sunday to
emphatically say there was no dividend, and Conservative MP Sarah
Wollaston for saying
it was complete nonsense, as well as the two references already given
in the FT and from Sky News. I hope there were other examples that I
did not happen to notice.

What about
the BBC? It did have Paul Johnson on, and Laura Kuenssberg did at
least ask
the existential question, although she felt unable to answer it.
(There are not ‘economic’ and ‘political’ truths: arithmetic
is arithmetic, lies are lies.) But there are unfortunately other
occasions when the Brexit dividend was treated as if it was real and
put into headlines (e.g. here),
missing out the first layer of the truth sandwich. And of course the
Marr interview on Sunday, where he did not even question the concept.
All too often (e.g. here)
any questioning of the dividend was left to the end of the article
and was presented in the standard ‘he said,she said’ format.

Why does this
all matter? In terms of Brexit, it is obvious. Another barefaced lie in the Brexit campaign was £350 per week
for the NHS. Most Brexiters continue to believe that they will be
better off after Brexit, and I suspect most are not aware why this is
unlikely to be true. Talk of the Brexit dividend is designed to keep
them in their ignorance.

But I think
its importance goes well beyond Brexit. Why don’t politicians lie
more often to enhance their cause? Some have integrity, but for the
others the deterrent is being found out. But being found out depends
critically on the media calling out lies when they happen. And when a
large section of the media are very selective about how they treat
lies depending on who said them or why they were said, or indeed are
often the source of these lies, society has a serious problem.

That is the
situation in the US with Fox and Trump and in the UK with the right
wing press and Brexit or the Conservatives more generally. How the
print media in the US and the broadcast media in the UK treats lies
has therefore become critical. With lies ‘she said, he said’ type
reporting is just not sufficient to defend democracy. Now often it is
quite difficult to prove someone is lying, but if I could delineate a
barefaced lie as one where it is very easy to establish the truth,
then the Brexit dividend is a barefaced lie. OBR documents, accepted
by the government as the basis for their tax and spend decisions,
show quite clearly that the money has already been spent. You cannot
spend the same money twice.

The right
wing Brexit press have already supported this lie. As most of their
readers also watch broadcasters, it is imperative that these
broadcasters inflict some political damage on those who tell the lie.
If they do not, the lesson certain politicians will draw is that they
too can get away with barefaced lies, encouraging the kind of
behaviour we see with Trump. For that reason broadcasters have to
speak truth to power, otherwise the non-partisan media becomes complicit in propaganda or just a mouthpiece for politicians.

Saturday, 16 June 2018

If you want to see
how the centre-right can lose out big time you just need to look at
the US. Last week a Republican senator who had been critical of Trump
lost
to a Trump loyalist in a primary. Partisan voters prize loyalty, you
may say, but this is loyalty to someone who lies all the time, and
prefers the US’s traditional arch enemy Russia to its traditional
allies. The US is just a few threads away from becoming yet another
elected dictatorship. One of those threads is the Mueller
investigation, and we will see if any Republican ‘rebels’ who
want to impeach Trump are made of sterner stuff than the Brexit rebel
Conservative MPs.

The story
of neoliberal overreach is in part about how centre-right politicians
set in place or promoted causes or institutions that would allow for
the ascendency of the hard-right and then eventually their own
demise. In the US this stretches from repealing the fairness
doctrine, which led to hard-right talk radio and then
Fox News, to increasing the role of money in elections and finally
allowing Trump to win the presidency. In the UK it involved promoting
austerity and an immigration target that was bound to fail, both of
which directly led to Brexit.

Once these
conditions have been set in place to win votes or shrink the state,
there seem to be two stages in the process through which the
centre-right concede power to the hard-right. The first stage is a
belief that the centre-right are still in control when clearly they
are not, or a blind optimism that the hard-right can be easily bought
off. In the UK that is the stage where Cameron gave in to UKIP and
newspaper pressure and agreed to a referendum on EU membrship. The
centre-right make concessions to the hard-right to preserve party
unity.

The second stage is
where the hard-right have control, and play on this centre-right
belief in party unity to prevent the centre-right from rocking the
boat. [1] We saw this in the US under Obama when the Republicans
scorned all the President’s overtures for bipartisanship. In the UK
we are seeing it right now in how easily most Remain voting
Conservative MPs are happy to go along with the current farce, and
how easily the small band of rebels can be persuaded to cave.

The latter is due in
part to our equivalent of Fox News conducting a hate campaign
against these rebels. There is nothing subtle about this: try to vote
against the government to prevent a national disaster and those big
four right wing newspapers will headline on saying you are going
against the will of the people and even imply you are a traitor. Whipping
up this kind of hatred is no joke when followers of the ultra-right
have already murdered one MP and tried to murder another. Yet before
you start feeling some sympathy for the rebels subject to these
newspapers attacks, remember these same centre-right Conservative MPs
were quite happy to indulge the same papers by voting down Leveson 2.

It is also a result
of the BBC increasingly shying away from anything that could be
construed as critical of the government, and dumbing down political
discussion. The rabid right wing press pretend that any form of
dissent from the government’s chosen path of implementing Brexit is
betraying the will of the people, confusing the government with the
people just as authoritarian governments have always done, yet the BBC
panders to the idea that these rebels are really trying to stop
Brexit by constantly labelling the rebel MPs as Remainers.

As a result,
Conservative MPs duly voted through substantial increases in
executive power at the expense of parliament. There is now a grave
danger that they will get played by the Brexiters. The Brexiters
should by now know that any deal that can be done will be some form
of soft Brexit, remaining in the Customs Union and Single Market for
goods for sure. That is not the kind of divorce they wanted. They
keep saying that the possibility of No Deal must be kept in play to
increase our negotiating power, having conceded all our negotiating
power by invoking Article 50 with no discussion and little plan.
Perhaps the real reason is that they would not be at all unhappy that
through their belligerence time for a deal disappears, and we get No
Deal by default. Chris Grey calculates
there are only 62 working days left to do a deal, and May is not even
near the range
of possible deals yet. If the Brexiters plan is to talk out a deal so
we exit without one, it seems to be going very well.

For months I have
been saying that No Deal would not happen because parliament would
not let it happen. I still think it is unlikely, but as a result of
the votes last week and the UK side in the Brexit negotiations going
backwards since December I am much less confident than I was. The
slide from a pluralist democracy to an elected dictatorship or a
right wing plutocracy
[2] is full of moments when sensible people say this could not
possibly happen here.

[1] Contrast
Conservatives voting on block to sweep aside the Lord’s amendments
to the Labour rebellion over the EEA. Often the fact that Labour MPs
have views for which they are quite prepared to vote against their
leadership is seen as a political weakness, but what we are seeing
right now is the Conservative desire for party unity as a colossal
political weakness.

[2] Before anyone
objects, of course this only applies to the UK on the single decision
of Brexit, for now. But Brexit is perhaps the most important change
in UK politics since the election of Margaret Thatcher, and the way
this change has come about does show structural similarities to the
transformation of the US Republican party that led to the election of
Donald Trump.

Thursday, 14 June 2018

Laura Basu has a
good book
just out on UK media coverage of events from the Global Financial
Crisis (GFC) until 2015, which I have reviewed for Open Democracy. Among other things, it tells the story
of how what Mark Blyth calls
the ‘biggest bait and switch in history’ happened in the UK.
Laura argues that it can be dated almost exactly to the Budget of
April 2009.

That the right wing
press would start talking about the horrors of the rising UK deficit
is no surprise. Osborne had decided in the previous year to oppose
the Labour government’s stimulus measures because he saw in the
rising deficit a way to beat Labour. The puzzle is why a broadcast
media, ever conscious of balance, pushed the same line, even though
it was clearly advantageous to one side politically.

The following story
is mine, not Laura’s. Before the GFC, the way that the broadcast
media covered budgets had become quite formulaic. Each budget would
present estimates of the deficit over the next five years, and with
the help of the IFS commentators broadcasters would discuss not only what tax
changes had been announced, but also what might be implicit in the
projections. No doubt this framework suited journalists well, because
it allowed easy analogies with households. If the IFS felt that the
projections were over optimistic and therefore fiscal rules might be
broken, they said so and that became one of the budget talking
points. The state of the economy was hardly ever discussed, because
the Bank of England seemed to be doing a pretty good job of keeping
things stable.

That all changed
with the GFC, when monetary policy ran out of reliable levers to
manage the economy. However journalists wouldn’t know that from the
Bank of England, who tended to talk as if Quantitative Easing was a
close substitute to interest rates as a monetary policy instrument.
They would know it from academic macroeconomists, but journalists
were generally too busy to make the effort to talk to them. For
whatever reason, they did not fully appreciate how much the world had
changed as a result of the GFC.

So when in the
budget of April 2009 the Treasury showed the full extent of the
deficits that the recession (and to a smaller extent the government’s
stimulus measures) had created, journalists behaved exactly as they
would have done before the GFC. Compared to deficits seen before the
financial crisis, the numbers were indeed large. But crucially,
because the Treasury estimated that the GFC had reduced the trend
level of GDP, fiscal savings were necessary as a result. When these
took the form of efficiency savings, the IFS were rightly skeptical.

So the coverage
was all about higher taxes and lower spending, and whether they would
be enough to close the record deficit. At no point in the subsequent
discussion
does anyone ask whether the current deficits are large enough to
create a strong recovery. The growth forecasts are taken as given,
and only their fiscal consequences are discussed, as if the former
had nothing to do with the latter: an assumption that is only
appropriate if monetary policy is in complete control of the economy.
The government’s line that these deficits were necessary to
‘support’ the economy was almost entirely ignored.

Furthermore, the
issue of whether the markets would purchase all this extra debt was
already being raised.
This is City speak, seeing a recession as involving more government
debt and therefore perhaps higher rates, rather than understanding
that the recession was caused by more saving and less borrowing so
there would be plenty of new savings to buy the additional debt.

In other words the
broadcasters had a framework for commenting on the budget which was
appropriate before the financial crisis, but totally inappropriate
after it. What they should have been asking is whether the Chancellor
had done enough to ensure the recovery that was forecast, or whether
perhaps larger deficits might be needed. In retrospect, that was
exactly the right question to ask.

At the time, the reason for these deficits was clearly spelt out by
the IFS as well as the Treasury. "The Treasury's assessment of
the fiscal damage wrought by the current economic and financial
crisis is breathtaking," said IFS director Robert Chote. "It
will require two full parliaments of mounting austerity to repair."
But in a telling indicator of things to come, the headline paragraph
loses the bit about the GFC. As Laura’s book shows, it became so
easy for a media prone to amnesia to forget about the financial crisis
and blame everything on Labour profligacy, as after a time most
voters began to believe. But the fundamental mistake was focusing on
the deficit as a problem rather than as an instrument designed to
produce a strong economy. The mistake came from the media’s
inability to see how the GFC had changed the macroeconomic rules of
the game.

Monday, 11 June 2018

The moment it became
clear that the EU would give full backing to Ireland’s wish for no
hard border, and on the assumption that the UK side
would not allow a sea border between Northern Ireland and the rest of
the UK, it was clear what the range of possible deals between the UK
and EU would be. The maximum possible change that would prevent the need for a hard
border is that the UK stay in the Customs Union (CU) and Single
Market (SM) for goods, while not accepting Freedom of Movement (FoM):
the Jersey option. The minimum possible change is that the ‘transition’ became
the final deal, with the UK staying in the CU and complete SM
including FoM: the BINO (Brexit in name only) option. The final deal between the EU and UK has to lie somewhere between this minimum and maximum.

It is also where any
final deal should have been anyway, given how close the referendum
was. All the evidence
we have suggests that those who voted Leave do not want a deal that
will make them significantly poorer, which means that the final deal
should be one that does the UK little economic harm. The negotiations
should have focused from the start on what limits to FoM were
possible at what cost in terms of (partial) membership of the SM. These
negotiations should have taken place informally before Article 50 was
invoked to give the UK some bargaining power.

Instead Theresa May
allowed
the whole process to be hijacked by the Brexiters, who treated the
referendum like an election win with no manifesto. They believed they owned the referendum victory, and so acted as if they had the right to decide what Brexit means.
As a result, we have wasted time talking about impossible deals,
rather than negotiate within the space that a deal can be done. It is
in fact worse than that. May and the Brexiters, by refusing to let go
of their fantasies (about a technological solution to the border
problem or about the EU caving into their wishes to be part of the
club without signing up to the rules) have split the negotiations
into two parts: the preferred deal and the backstop.

As has now become
clear, the idea of a backstop is predicated on there being a customs
border between Northern Ireland and the rest of the UK. The EU should
never had allowed this device because they should have understood
that such a border would be politically impossible. Instead they took
far too seriously May’s red lines, which they interpreted as the UK
wanting a FTA which would in turn require a border in the Irish Sea
to avoid a hard land border. They made the mistake of thinking that
because this was obvious to any objective observer the UK side acknowledged this fact. May
encouraged this belief by appearing to agree in December to a sea
border, only to be pulled up at the last minute by the DUP. In short,
the EU made the mistake of thinking it was negotiating with a
rational counterpart, rather than one that was at war with itself.

This is the context
of the parliamentary votes on the Lord’s amendments
on 12/13th June. Parliament is, in effect, trying to manage the
negotiating process because those conducting the negotiations so far
are getting nowhere. Some of these amendments attempt to direct the
government towards negotiating in the relevant range (the CU
amendment proposed by Lord Kerr), and to give them the space in which
to do so (by removing the date of exit which was inserted into the
bill by May as a way of appeasing her Brexiter colleagues or Paul
Dacre). I suspect May would privately welcome both amendments if she has any
understanding of what is going on.

The EEA amendment
appears to suggest a specific point in the range of possible deals,
which is why the Labour leadership and some of their MPs dislike it.
I think their attitude is a mistake. The way to think about the EEA
amendment, which is only expressed as a negotiating aim, is to steer
the government towards the possible range of final deals, which has
to include staying in the Single Market for goods. If this is not
passed we will just waste more time as May fiddles around trying to
inch closer to the possible range without the Brexiters throwing
their toys out of the pram. [1]

There is also a
purely short term political reason for the opposition supporting the
EEA amendment. As I noted above, May will probably find it a relief
to be directed to stay in the CU. She is already at the stage of
realising that the UK staying in the CU is essential for a deal. The
Brexiters will huff and puff, and Fox may even resign, but their
anger will be directed at parliament more than May. The EEA amendment
in contrast is likely to cause far greater discomfort in government:
it is difficult to see how any Brexiter cabinet ministers will suffer
this. So in terms of damage to the government, EEA inflicts much more
than the CU.

May will also not
welcome what is perhaps the most important amendment, proposed by
Hailsham, which gives parliament the ability to direct the Prime
Minister if the negotiations fail or the deal is voted down by
parliament. However she has only herself to blame if this is passed, in particular for
threatening no deal if parliament rejected her deal. By allowing the
Brexiters to hijack the negotiations process, it is not surprising
that parliament should decide that they need to start calling the
shots. As Labour seem quite likely to reject a deal if she manages to
achieve one, this amendment is crucial to minimise the subsequent
chaos. The amendment is not quite parliament taking back control of
the negotiation, but it does mean that May will have to start taking
directions from parliament rather than the Brexiters. That has to be good for democracy in the UK.

[1] Nor should the
EEA be seen as something that is inflexible. It already contains a
brake on immigration, where countries can take
"appropriate measures" if serious economic, societal or
environmental difficulties of a sectoral or regional nature arise and
are liable to persist. There are lots of other issues
that would have to be addressed if the UK signed up to the EEA
outside the EU, which means there will be the opportunity to
negotiate around issues to do with immigration or state aid.
Postscript (13/06/18) The government did not lose a single vote yesterday, and it will be surprising if they do today. Rebel Conservative MPs did get some concessions which will hopefully allow them to have some influence over a situation where MPs vote against the final deal or there is no deal, and the rebel numbers were increased by the resignation of Justice minister Phillip Lee. But they completely failed to start directing how May conducts the negotiating process, which leaves the Brexiters as a constant drag on May's efforts to start negotiating something that the EU might accept.
At the end of the day, Conservative MPs have put party before country. Brexiters have hijacked the negotiation process, and Conservative MPs are content to let that continue, even though time for a deal is running out. The bill they voted on yesterday and today involves a substantial transfer of powers from parliament to the executive, and Conservative MPs do nothing about it. A rabid right wing press encourages far right nutters to murder one MP, attempt to murder another, with one Conservative rebel requiring armed guards because of threats, and the same Conservative MPs do nothing about it because that press helps their party. Just as in the United States, nowadays a pluralistic democracy is unsafe when the main right wing party is in power. Based on this record, I cannot see Conservative MPs voting against any final Brexit deal, which in turn means the chances of a second referendum - always slim - have all but vanished.